Increasing the State Pension Age won’t increase the average retirement age

First published at www.ilcuk.org.uk

Recent years have seen the Government announce plans to increase the State Pension Age in the UK to 66 by 2020, 67 between 2024 and 2026, and 68 (at least?) by 2046.

Yet new analysis by the TUC has highlighted the flaw in the assumption that increasing the State Pension Age will increase the effective retirement age and therefore save the state money.

The TUC research shows that people aged just below the State Pension Age have very low rates of employment. Of those approaching State Pension Age, just 54 per cent of men aged 60-64, and 62 per cent of women aged 56-60, are in work. Among this group, long-term sickness and disability is cited as the main reason for individuals not working. (http://www.tuc.org.uk/economy/tuc-21355-f0.cfm)

If this trend continues, the Government’s plans to increase State Pension Age may simply result in higher poverty, with individuals (particularly from some manual professions) not able to work but too young to receive a state pension.

Yet we know it is vital to increase the average retirement age. Our economy needs the contribution of older workers and the state will struggle to continue to pay adequate pensions to meet the growing number of years we are spending in retirement. Increasing the State Pension Age needs to happen as planned and we need to increase the effective retirement age.

But what can and should Government do if State Pension Age does not significantly increase average retirement age?

In 2010, ILC-UK published a report, The Future of Retirement, which highlighted that there were many different reasons why people left the workforce early (caring responsibilities, poor health, financial incentives etc). If we are to support people to work longer, we must look at all of these different factors.

Just this week Age UK launched a new report, A means to many ends, arguing that flexible working has to play a role in supporting people to work longer. They called for the right to request flexibility to be available to all, and urged “flexible by default” whereby the onus is on the employer to justify why a role can’t be done flexibly.

Age UK seem to be pushing at open doors. Speaking at the event, the new Government Minister, Jo Swinson committed to pursue flexible working and shared parental leave, arguing that flexible working should be for all, not just carers.

Alongside the need for greater flexibility generally, we need to see greater progress towards policies which support gradual retirement. More opportunities for older people to gradually reduce hours worked, or to work part time, would help facilitate increases in average retirement age. We also need to ensure the end of ageism in the workplace.

Perhaps we also need stronger financial incentives to support the individual to work longer. Better promotion of the right to defer the state pension would be helpful. Perhaps we should even look to models of graduated pensions, where pension levels are set lower when we first retire and then become more generous as we age. See Gradual Retirement and Pensions Policy.

But as the TUC point out, Government cannot just continue to play lip service to health inequalities. Initiatives to prevent ill health later in life need serious investment.